The Tug-of-War Between Real Estate Markets and Agricultural Population

2023, to stimulate the real estate market, various local policies were introduced.

One particularly noticeable policy is as follows:

Jilin Province: Support various localities to carry out subsidies for farmers to buy houses in cities, and reduce the cost of farmers to buy houses in cities.

A quick search for “farmer housing policy” on search engines reveals that since 2022, provinces such as Jiangsu, Shandong, and Gansu have successively introduced subsidies or preferential policies for farmers moving to cities to buy homes.

Attracting farmers into cities to purchase homes isn’t a new strategy; it has been a key performance indicator for the past decade as local governments at all levels dissected the macro policy goal of “urbanization”. Tracing back, this trend arguably began around the winter of 2011, as noted in the conclusion of “Hidden in the Dust”.

However, the current trend of encouraging farmers to invest in urban real estate shouldn’t be cynically viewed as a scheme to exploit them. After all, enabling more people to enjoy modern, safe, sanitary, and convenient urban living is one of the most important goals of a modern society.

Yet, it seems that all business in China operates like a game of acquiring ‘traffic’, and now, the real estate market is also grappling with a “traffic issue”.

Specifically, with declining birth rates and a stable overall population, the principle is straightforward: more people in cities means fewer in rural areas.

So, the question arises: is China facing a shortage of rural population?

Since 2020, China has officially placed high importance on food security. This began with consumer-focused initiatives like the “Clean Plate Campaign” and the “Anti-Food Waste Law,” and later evolved into policies interpreted by some local authorities as converting forest land back to farmland, aiming to secure 1.8 billion mu (about 120 million hectares) of arable land.

According to an article in “Cultural Perspectives,”1 the number of agricultural workers in China had decreased to 177 million by 2020. Despite the Seventh National Population Census indicating a rural population of 509.79 million2, in reality, only 177 million were actively engaged in agricultural activities.

Translated by Google Translate.

At first glance, the 1.8 billion mu arable land seems well matched for 177 million agricultural workers. After all, with basic agricultural machinery, a farmer can cultivate about 50 mu in the plains. However, two factors disrupt this balance:

  1. Much of China’s land is not flat, with many farms located in mountainous and hilly areas, requiring more labor-intensive, meticulous farming without the aid of machinery.
  2. The 177 million agricultural workers include those involved in animal husbandry and fruit tree cultivation, not all of whom are engaged in cultivating the 1.8 billion mu of grain farmland.

Post-liberation, the dual household registration (hukou) system in China provided a continuous driving force and basic support for urban development. This is a consensus in the domestic social sciences academic community. Initially, this system supplied cities with cheap materials (industrial raw materials and food), and later, with inexpensive industrial labor.

On the surface, the hukou system binds people to geographic spaces, but it effectively ties them to specific types of labor. In China, land is categorized with fixed attributes – urban land, basic farmland, industrial land, commercial land, etc. Having a rural hukou means one cannot engage in urban-type work in the city permanently, because aspects like childbirth, education, healthcare, and elder care require them to return to their registered rural area to access corresponding social benefits.

It’s well-known that in the 90s and the early 2000s, many rural workers’ life plan involved earning money in big cities and then returning to their villages to build houses. This personal life goal is a reflection of the macro-level institutional impacts on individual development paths.

Encouraging farmers to move to cities profoundly alters the narrative of their lives and the foundation of the agricultural workforce. Data shows a significant decrease in the population actively engaged in farming, from 255 million3 in 2012 to 177 million4 in 2020. Meanwhile, China’s consumption of agricultural products, including grains, has been on the rise during these years.

In 2012, China’s import of agricultural products was valued at $112.48 billion. By 2022, this figure had doubled to $236.06 billion. In the past five years, the price of agricultural and sideline products, such as fruits, which are not controlled by the government like grains and pork, has also increased significantly – a fact that urban residents have personally experienced.

The future will likely see unabated domestic demand for agricultural products. As more rural populations adopt urban lifestyles, their demand for these products will increase, yet the number of producers is set to decrease. This presents a stark contradiction.

The phenomenon of unattended farmland in rural areas drew public attention around 2010 and led to a wave of “debunking” articles in 2014, like the one by He Xuefeng in the Global Times, which dismissed concerns over insufficient agricultural labor. His argument hoped to use the hukou system to bind older rural residents back to the countryside for farming:

If they cannot earn the expected income in rural areas, they will move to cities for work or business. Otherwise, they would be seen as lazy in their local communities. Especially for farmers over 45, they will eventually return. As they age, their income expectations decrease, reducing their opportunities in the city. Thus, a balance is reached where city work income equals farming income, currently around the age of 55-60.

“Is ‘No One to Farm’ a Real Problem? — Based on Research in Sheyang, Jiangsu”

However, as mentioned at the beginning, various regions are actively encouraging rural residents to buy homes in cities to rescue the real estate market and, by extension, the urban economy. This suggests an increasing number of rural residents will permanently transition to urban hukou, significantly reducing the likelihood of them returning to farming as before.

In the broader and long-term view, the decoupling of occupation and hukou is an inevitable trend. Furthermore, the situation is not without solutions. According to a 2018 survey, there were already around 17 million professional farmers in China5, including some with non-agricultural hukou.

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